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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Momentum is the measurement of the speed or velocity of price changes. It is measured by continually taking price differences for a fixed time interval. To construct a 10-day momentum line, simply subtract the closing price 10 days ago from the last closing price. This positive or negative value is then plotted around a zero line.
Momentum measures the rate of the rise or fall in stock prices. From the standpoint of trending, momentum is a useful indicator of strength or weakness in the issue's price. History has shown that momentum is far more useful during rising markets than during falling markets; the fact that markets rise more often than they fall is the reason for this. In other words, bull markets tend to last longer than bear markets.
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